Skills-based hiring

Part 1: What is skills-based hiring and why is it happening now?

From CV to competency profile

Skills-based hiring means recruitment decisions are made based on candidates' actual abilities. Instead of asking "What degree do you have?" organizations ask "What can you actually do for us?"

This shift is driven by several converging forces:

1. Technological change at rocket speed

The World Economic Forum predicts that 50 percent of all jobs will be transformed by automation over the coming decade, though only about 5 percent are expected to disappear entirely. When new roles emerge faster than education systems can adapt, demonstrated competence becomes more important than formal credentials.

2. The competence paradox

72 percent of companies globally cite skills shortages as a major challenge, according to Deloitte's Global Talent Trends Report. At the same time, people with the right competencies are being filtered out by degree requirements. What we call "skills shortage" is often a matching problem.

3. Democratization of learning

Coding bootcamps, online certifications, self-study, and practical experience create competence that is as valuable as traditional education, but which was previously rarely captured in formal recruitment processes.

The pioneers showing the way

IBM has removed degree requirements for many roles through its "New Collar" initiative and focuses on practical skills in cloud services and AI. Between 15 and 20 percent of their American recruits now come from non-traditional educational pathways, according to IBM's own reporting.

Google and Apple have eliminated degree requirements for a large number of positions and prioritize candidates who can demonstrate relevant skills and competencies. This has opened doors for talent from diverse backgrounds and educational paths.

LinkedIn, which drives this trend globally, applies the same principles in its own recruitment. Their data shows that companies transitioning to skills-first can expand their available talent pool by up to 10 times globally, and in the US up to 19 times.

Part 2: Competence as a value asset

Here we come to the core of why skills-based hiring represents a fundamental reevaluation of how we view competence in organizations.

The invisible asset

In today's economy, a company's balance sheet can show technology investments, brand value, and intangible assets, but human capital—the collective knowledge and competence of employees—is invisible. When a company buys new technology for 10 million, it's recorded as an asset. When the same company invests 10 million in competence development, it's recorded as an expense.

The World Economic Forum expresses the paradox clearly: despite human capital being a crucial driver of value creation, it is accounted for differently than other assets in our balance sheets.

This creates a fundamental distortion:

• Investments in people are seen as costs to minimize
• Competence is treated as consumables
• HR departments are forced to justify training as "cost" instead of showing it as value appreciation

Skills as currency

When we transition to skills-based hiring, we implicitly begin treating competence as a unit of value. LinkedIn talks about "skills as currency"—competencies as actual currency in the labor market.

This perspective changes everything:

Traditional view: "We have 50 employees" (quantity)

Skills-first view: "We have X points in AI, Y points in project management, Z points in communication" (qualitative portfolio)

Models already exist for how this can be measured. Jan Koster at the Dutch HR association NVP published in 2012 a framework for how human capital can be valued by combining education level, experience, skill levels, and behavioral competencies in a unified model for value calculation.

An organization with 50 employees can, using such a model, estimate a human capital value of thousands of points, or, translated to economic terms, millions in currency.

Football as a pioneer

One of the few areas where human capital actually appears on the balance sheet is professional football. When Manchester United buys a player, the transfer fee is recorded as an asset and depreciated over the contract length.

What does an investor actually buy when they buy a football club? The players and their abilities. Without the players, the club is worthless.

The same logic applies to all knowledge-intensive organizations, but is rarely explicitly recognized.

Part 3: Implementing skills-based hiring

Step 1: Map existing competence

Before you can recruit based on competence, you need to know what competence you already have. Use structured methods for competence inventory:

• Create competency matrices showing both technical and soft skills
• Use self-assessment combined with manager evaluation
• Identify unused capacity (competence that exists but is underutilized)

Step 2: Rewrite job descriptions

Old model: "Required: Master's degree + 5 years of project management experience"

Skills-first model: "Required: Proven ability to lead technical projects from start to finish. Can be demonstrated through: formal education, certifications, portfolio of completed projects, or documented experience."

Focus on:

• What the person actually needs to be able to do
• What problems they need to solve
• What results they are expected to deliver

Step 3: Develop assessment methods

Replace CV screening with competence assessment:

• Practical tests: Coding challenges for developers, cases for analysts
• Simulations: Role plays for leadership roles, presentations for communication roles
• Portfolios: Previous work as proof of ability
• Reference verification: Focused on actual performance capability

Step 4: Integrate with competence development

Recruitment and development need to work together:

• Identify which competencies can be strengthened after hiring
• Create clear development plans from day one
• Focus on potential and learning ability alongside existing competence

Step 5: Build a skills-first culture

Long-term success requires cultural change:

• Train managers to conduct development conversations based on competence
• Set goals for internal mobility based on competence matching
• Measure and track how the competency portfolio develops over time
• Reward learning and competence development

Part 4: Challenges and critical success factors

Validation of competence

The biggest challenge is verifying skills. 62 percent of HR professionals report that competence validation is difficult, according to SHRM. Solutions:

• Use standardized tests where possible
• Build partnerships with certification bodies
• Create internal assessment frameworks
• Combine multiple assessment methods

System support is required

Data collection is the start, not the goal. Systems are needed that:

• Handle large amounts of data
• Enable analysis and filtering
• Visualize the competency portfolio
• Support simulation and scenario planning

For larger organizations, it's crucial to work in a system where competence data can be tracked in real-time and used strategically.

Leadership anchoring

Skills-based hiring requires a change in how leadership and HR think. This requires:

• Investments in new tools and processes
• Patience during the transition
• Measurement of effects (to maintain support)
• Communication about why the change is happening

Looking ahead: From static measurement to dynamic competence understanding

Measuring competence as an asset is an important first step. But competence is not static. It develops, matures, and creates value in different ways over time.

Sales training can have an effect within weeks. Leadership development can take years to show results. Strategic competence matures even more slowly. Moreover, competence creates value on multiple levels simultaneously: financially through increased productivity, operationally through better processes, and structurally through stronger organizational capacity.

Future competence models need to capture this dynamic. We are actively working to develop more sophisticated frameworks that can show how competence develops over time and creates value in multiple dimensions. It's about moving from a snapshot to motion, from static inventory to dynamic competence understanding.

Conclusion: From cost to capitalization

Skills-based hiring is not just a recruitment method. It's a new way of viewing competence.

When we recruit based on actual abilities, we also begin to think of competence as something valuable in itself—something that can be inventoried, developed, and strategically utilized.

The question for organizations is no longer whether this development will affect us. It's about how quickly we can adapt.

Organizations that succeed will:

• See competence as an asset to invest in
• Recruit more broadly and smartly
• Develop their employees based on actual abilities
• Build systems that make competence visible and activated
• Create cultures where learning is valued and rewarded

In a world where competence becomes the new currency, those who learn to count correctly win.

Sources:

• McKinsey Workforce Transformation Report 2024
• TestGorilla State of Skills-Based Hiring 2025
• LinkedIn Future of Recruiting Report 2024
• LinkedIn Skills-First Report (Economic Graph)
• Burning Glass Institute & Harvard Business School: Skills-Based Hiring 2024
• Deloitte Global Talent Trends Report 2024
• SHRM Skills-based Hiring Studies 2024
• World Economic Forum Future of Jobs Report 2023
• IBM Policy: New Collar Jobs
• Koster, J.E.G. (2012). Human Capital Valuation. NVP/EAPM.